Looking at why the monthly subscription model doesn’t work.
Streaming services have gotten a lot of negative press around the question of fairness. It’s become such a meme that we found ourselves sucked into the debate and in some cases didn’t even question our own logic of why we were jumping on the streaming-service-bashing-bandwagon.
The whole #fairmusicstreaming issue has often centered around royalty payments, or per stream rates, sometimes revealing the disconnect between published and actual payouts. Or the differences in label earnings versus artist payouts. But those are issues for another post.
What’s often missed in all the debate is the core of the problem — the monthly model itself simply doesn’t work.
The streaming services, artists, fans nor the labels. (Well, maybe it’s working for some of the labels… that gets a bit more complicated.) Let’s look at each of these groups, one by one.
Why Artists Lose From Streaming
The infographic above pretty much says it all. It’s a remix of a complete analysis from Information is Beautiful. As a signed artist, the only way you’re gonna make minimum wage via YouTube (still by far the world’s largest music streamer) is if you becoming massively famous. Over 4M streams. Crazy stupid famous.
The problem is that per stream rates are ridiculously low. By way of comparison, as an un-signed artist your fans would have to stream the same song on Spotify over 150 TIMES to equal the price of a download.
$1.29 iTunes download — 30% Apple fee = $.90 for artist
.90 / .006* = 150 plays
Simply put, per stream rates are so low that as an artist you’re only going to earn a living via streaming if you’re famous. Crazy stupid famous. (Yes, it’s worth repeating.) And please don’t give us that tired old “musicians only ever earned money from touring” argument. It’s specious at best; a purposeful misdirection at worst.
Then there’s the indie versus massive pop star problem.
Others have written more extensively about this, so we won’t dive into the full details, but it boils down to a big problem… in order to reconcile wildly different listening patterns (minutes listened per day and type of music) streaming services are forced to employ some funky math that ends up benefiting more popular artists over indies or newcomers. (Plus if you’re an indie artist you’re going to have a MUCH harder time being discovered than artists with labels that co-own the streaming service.)
Why Fans Lose From Streaming
At first glance, it seems like the fans aren’t hurting at all with monthly subscription models.
In fact, they seem like the real winners when it comes to streaming. Instant access, massive catalogs, no need to manage files on various devices. But if we start to peel back the shiny veneer, we can find cracks and flaws which reveal some of the fragility of the current model.
First there’s the problem of exclusives. Fans have been lamenting the fact that when big artists offer exclusives to Apple, Spotify, Tidal or whoever, they’re forced into maintaining multiple multiple subscriptions, sometimes even forgetting when a subscription moves from trial offer to recurring billing. Even though one of the major labels dropped doing exclusives, they’re far from over.
Next there’s usage patterns. Spotify estimates their users spend 110 minutes a day in their app. But is that usage consistent? As a Spotify subscriber myself, I’ve often gone long periods of time not using the app, but the billing keeps churning — users keep paying whether they’re using it or not. Then there’s the question of the heavy users. The bars, cafes, restaurants, shops, gyms and other venues that have it running 12–16 hours a day. By having a “all you can eat” model, listeners that only stream an hour a day are effectively subsidizing those that stream for 12.
Then we can add in the varying degrees of access across devices. I used to think it didn’t make any sense that certain services were completely different from laptop to mobile. Until I found out about the way that organizations like the Harry Fox Agency (which handles various types of royalty and licensing arrangements for music within the U.S.) treats different services… the rates are different based on what type of device you’re using and whether the files are available with/without an internet connection. It’s a big complicated mess, so we can see why services are forced into offering different types of access for different situations. In the end, it means less convenience for fans.
Next is cost. Since average listeners can’t afford a $10 per month subscription, they’re forced to either use non-interactive services like Pandora that don’t offer searching for specific content or suffer the slings and arrows of outrageous advertising. (If the major services end up offering ad-free $5 a month plans in the future, you can bet that it will be on the backs of the artists, leading to dramatically lower per-stream rates.)
Finally, when it comes to how fans are losing out with the current model, we need to blow through all the hype around ownership versus access. A lot of lip service is paid to this notion that since all our digital lives are now hosted in the cloud, people don’t care about owning files anymore. Let’s ask the following questions…
- How many times did you lose access to your favorite tunes when the network went down?
- When you lost wi-fi connectivity?
- When you over-extended on your mobile data plan?
- And are you really sure you want to remain fiscally indebted to these services year upon year, essentially just renting the music you love, but never owning it?
Why Streaming Services Lose From Streaming
What’s the most obvious indicator of success in capitalist-based economies? Profit. So we can start off asking if the monthly subscription model works by asking, who among the streaming services is profitable? The stats speak for themselves.
Another Model is Possible
So hopefully we’ve seen some clear evidence that the $10 a month subscription model doesn’t work for a lot of different reasons. But is there a way to still have our streaming cake and eat it too? Yes indeed…
Introducing “Stream to Own”
We’ve written extensively about this exciting new model elsewhere, so let’s just look at the basics. By employing a “pay as you go” model instead of monthly subscription, we immediately enable the majority of listeners who can’t afford a monthly plan to enjoy an on-demand service. We do this through micro-payment credits that operate on an easy-to-use incremental system… gradual price increases over time:
Let’s split this up into two halves:
In the music discovery phase we find we can listen to the same song up to five times for around 7 cents. Plenty of time to find out whether you truly love an artist’s work. In the fan phase we switch to becoming a dedicated fan. This is also known as stream to support, because even though you’ll get access to the MP3 file after the 9th stream, it’s mostly about paying a bit more now so you can get more music in the future.
Of course, this is just one way of doing streaming differently. (For the sake of a very late ‘full disclosure’ I’m the author of this model.)
CASH MUSIC and other startups are exploring different ways of paying artists a fair, living wage. If for any reason you’ve reached the end of this article and are still asking yourself, “why does this matter?” then I encourage you to consider the following notion…
Digital content creators are the canaries in the coalmine for a wave of disruption that hasn’t even BEGUN to crest.
Solve these issues for artists and we may end up solving them for everyone else in the process.